Scary numbers

Gabriel Zucman, in his article in the special issue of Pathways, “State of the Union: The Poverty and Inequality Report 2016” (pdf), reveals lots of scary numbers about wealth inequality in the United States.* The scariest is the percentage of wealth owned by the top 0.1 percent of households, which “has exploded in the U.S. over the past four decades.”

The share of wealth held by the top 0.1 percent of households is now almost as high as in the late 1920s, when The Great Gatsby defined an era that rested on the inherited fortunes of the robber barons of the Gilded Age.

In recent decades, only a tiny fraction of the population saw its wealth share grow. While the wealth share of the top 0.1 percent increased a lot in recent decades, that of the next 0.9 percent (i.e., 99–99.9) did not. And the share of total wealth of the “merely rich”—households who fall in the top 10 percent, but are not wealthy enough to be counted among the top 1 percent—actually decreased slightly over the past four decades. In other words, $20 million fortunes (and higher) grew much faster than smaller fortunes in the single-digit millions.

The flip side of this trend is, of course, the wealth of the bottom 90 percent, which actually grew from 15 percent in the 1920s to 36 percent in the 1980s but dramatically declined thereafter. According to the most recent data, the members of the bottom 90 percent collectively own just 23 percent of total U.S. wealth, about as much as in 1940.

Yes, indeed, these are scary numbers.

*There are plenty of other scary numbers in the rest of the report, concerning U.S. poverty, income inequality, and much else—alone and in comparison to other countries.

However the increasing and severe inequality has not found any meaningful political expression as evident by the extraordinary paradox of much of the support for Trump who if we could get at the truth is probably a member of the .1%. If he wins the UK must be prepared to take its fair quota of American refugees. A Calais style ‘jungle’ in Grosvenor Square may be a bit far fetched!

Is wealth rock-solid or is there a wealth-bubble too? If wealth is the sum of all marketable goods currently owned (Milanovc) – does the measurement of wealth include the effect of bubbles? What would than approximately the share of bubbles in wealth measures, what are the consequences of bursting bubbles for the 0,01 and for the 99,9-ers?
Is there some literature on this?

When money is being held (as shown in the graph) it usually is invested or possibly spent on consumer goods. Both activities have the result of the money being used to employ others and to promote production.

So more logically, what this graph implies is that wealthy people are having a better and probably wasteful time at the cost of poorer ones. This is a relatively small matter compared with how much opportunity is being denied the poorer ones to earn a satisfactory wage, and this denial is being caused by the monopoly of natural resources.

If land were not being withheld for purposes of speculation in its value, the competition for its use would be less fierce and the rent being demanded for its access be reduced. With cheaper land, the cost of both produced goods and for residence would be less. Then we would all be better off and poverty would cease due the better chances of doing useful work by those poorer ones who are unemployed. This happy situation might be achieved by taxing land values instead of wages and purchases.

This response is not worthy of you, Patrick. The only suggestion of religion in J.’s comment was a reference to Trump’s pledge to defeat ISIS, which is in any case politics dressed up as religion.

Trump is certainly a rough diamond, but there are signs his heart is in the right place. Time will show whether he does any better at restoring justice by banging heads together than Obama (and before him, Keynes) did by polite and reasonable argument.

patrick newman

November 12, 2016 at 1:01 pm

I did not like being ‘preached’ to and it is not appropriate on this site.

Point taken But seriously, I get preached at not only by religious but by professors and others, more or less articulate. I haven’t minded because I’ve been given food for thought and learned a lot not only from the learned but from those, like J., with eyes to see and hearts still bursting to share their own “eureka” moments. As I see it, this site has the advantages over sermons and lectures that not only can the dumb reply but the intelligent inarticulate can have a voice.

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